Welcome to YieldReport

 

Interest Rate Commentary for 29 April – 03 May 2024

“Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee’s 2% inflation objective.”

The FOMC decided to keep its federal funds rate target range unchanged at the conclusion of its latest meeting this week. “Elevated” and “lack of progress” are not the sorts of words or phrases typically used by central bankers close to lowering policy rates.

However, it also announced a slowing in its balance sheet reduction programme, reducing outright redemptions of its Treasury bond holdings from US$60 billion per month to US$25 billion per month. So, a steady federal funds rate but less quantitative tightening…Powell said the change was to avoid financial market disruptions such as that which occurred in late 2019.

Sovereign 10-year bond yields finished the modestly lower in Australia, the US and major European markets. Gradients of yield curves generally became flatter in Australia and less negative in the US.

Cash futures prices reflect expectations in the domestic cash market of the actual cash rate rather than the RBA’s target rate. However, the two are usually close enough to consider them to be the same thing. Prices at the end of the week implied the expected trajectory of the cash rate through the 2023/24 financial year had moved lower this week, with some chance of a rate cut priced in between now and May 2025.

There were no changes to term deposit rates this week. The highest rate available in the survey is 5.10%.

BBSW mostly remained unchanged, although 6-month rates did move lower. Historically, 3-month BBSW has been at a modest premium (15bps) to the cash rate on average; the premium was 9bps at the end of this latest week.

The median margin of ASX-listed hybrids finished lower, well below the lower bound of the range which captures the majority of median margin readings from 2011 and close to its series low.

Swap rates fell, only slightly lagging the falls of their ACGB counterparts.

Measures of risk in corporate bonds, such as swap spreads, tightened modestly and credit default swap premiums moved lower on average.

The ICE Bank of America BBB US Corporate Index Option-Adjusted spread finished steady at 1.13%. The spread typically ranges between 1.00% and 3.00% in “normal” years.

We hope you enjoy reading this week’s YieldReport.

We hope you enjoy reading this week’s YieldReport.

What is YieldReport?

YieldReport is Australia’s independent online news portal focusing solely on fixed income and yield securities. Access to our site and regular email updates are free and only requires registration.

Many words are written every day about share markets but very few are written about perhaps the most critical market in Australia – the debt and fixed income markets. Furthermore, most people have limited understanding of the workings of fixed income markets, the different products available, where interest rates are going and even how to go about buying fixed income products. In fact, there is very little information about fixed income products outside the professional market and YieldReport hopes to change that.

The opinions contained in YieldReport are just that; they are the general view of our editorial staff and contributing writers and are free from outside commercial influences. While YieldReport does allow advertisements on its website and newsletters, it has no influence on the editorial content nor on the prices of securities quoted.

Our reports are designed to help anyone managing money – whether it be their own or whether they sit on a finance committee, board etc – to make informed decisions about where interest rates are going and to have access to the best rates available. Rather than relying on your own bank, YieldReport can tell you what all the banks are offering across a range of products. This helps you find the best rates available and can even help you to negotiate a sharper deal with your financial institution.

If you are one of the many thousands across the country that has to make a financial decision on behalf of others there is often a legal and compliance obligation to source the best rates and make an informed decision. With YieldReport you can now sit on your finance committee and know you have met your personal responsibility to act in the best interests of your organisation. Including YieldReport with your own performance reports can amply support the compliance or governance requirements many finance committees face.

We hope that you find our reports useful. We would welcome your feedback on ways to improve our offering.

 

What do I get?

YieldReport provides a weekly report on:

CASH ACCOUNTS	Compare the top cash account rates and monitor wholesale market movements and expectations on future cash rates
TERM DEPOSITS	Instantly compare over 470 term deposits. These are genuinely quoted rates and YieldReport does not receive any commissions or fees for providing the data
BONDS	Get yields on government and corporate bonds, news and commentary on market movements, the prices for the latest debt issues and more
HYBRIDS	Compare hybrid issues, review the latest pricing
MANAGED FUNDS	Compare dozens of managed Australian and international bond funds, diversified income funds, cash funds, mortgage funds and ETFs

Who is YieldReport for?